Vietnam gives power monopoly the power to hike prices

Depending on cost changes, EVN will be allowed to raise prices by up to 10 percent every six months without seeking gov't approval.

A government order issued this month gives power monopoly Vietnam Electricity (EVN) the right to raise or reduce retail prices every six months depending on cost fluctuations.

The new rule, which will take effect on August 15, says the state-owned giant will be allowed to increase electricity rates when input costs rise at least 3 percent.

If the company wants to raise prices by 10 percent or more, it will still have to ask the trade and finance ministries to seek approval from the prime minister.

The decision has raised public concern because it effectively gives the country’s only power supplier even more power.

EVN often claims losses when asking for permission to raise prices, and did so for the last increase of 7.5 percent to VND1,622 (7.7 U.S. cents) per kWh in March 2015.

Retail prices have stayed unchanged since then, but wholesale prices were lifted 2-5 percent in May last year.

The company reported a profit in 2016 with revenue jumping 14 percent from the previous year, but said that increasing prices for oil and coal will raise its costs this year by VND4.2 trillion.

Justifying price hikes by claiming it is operating at a loss is not entirely convincing given the fact that the company is also the country’s biggest debtor with $9.7 billion, accounting for 37 percent of all debts with a government guarantee as of June.

Deputy Minister of Home Affairs Nguyen Trong Thua said at a meeting in June that the debt “definitely keeps prices high.”

The trade ministry said at a press briefing earlier this year that the government will “carefully” consider any proposed price hikes because they could stand in the way of its economic growth target.